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Pension relief plans 'virtually unworkable'

31 March 2010
Categories: News , Income Tax , Investments
CIOT calls for further consultation on new restrictions

The tax profession’s leading professional body has criticised the Government for pressing ahead with ‘virtually unworkable’ changes to pension relief.

The Chartered Institute of Taxation (CIOT) says it is disappointed the Treasury has not altered its intentions to introduce restrictions on pension tax relief for higher earners from 6 April next year. The organisation believes the plans as they stand will ‘cause disproportionate complexity’ and should be consulted upon further.

The proposals were set out in a lengthy consultation document issued at the time of the pre-Budget report in December. The consultation period ended on 3 March, and the Chancellor confirmed in last week’s Budget that his department intends to legislate along the lines originally proposed.

The CIOT and pensions industry bodies had warned that the measures would cause a significant increase in administrative burdens for all concerned, including HMRC, and claimed the Government’s underlying policy objective could be achieved in other ways.

‘The proposed method of restricting tax relief will cause disproportionate complexity and an increase in the costs for employers… and the pensions industry as a whole,’ said Colin Ben-Nathan, chairman of the CIOT’s employment taxes sub-committee.

‘Even the Government’s own figures indicate that the compliance cost on business will be in the region of £1 billion in the scheme’s first year alone. It is disappointing that, having identified the magnitude of the cost to business, the Government is nevertheless continuing with its proposals virtually unchanged.’

The CIOT is calling on ministers to consult further with stakeholders to determine whether policy objectives can be achieved by adopting a ‘more straightforward’ approach.

‘If the objective is to reduce the tax relief the wealthy receive on pension contributions, we think a simpler way to achieve this would be to restrict the maximum amount you can put into registered pension schemes each year,’ said Mr Ben-Nathan.

‘In this respect, we have suggested a reduction from the level of £255,000, which… should apply from 6 April 2011 to approximately £50,000. In our view, the Government’s current proposals involve such administrative complexity as to make them virtually unworkable.’

Categories: News , Income Tax , Investments
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